1. Dispute Settlement Case
Savanna Schaffer, David Riedel,
Giselle Rodriguez

2. Agenda Main Issue Subsidies & CVD’s Definitions History & Context
Case Specifics
Proceedings
China’s position
US position
Articles
Inconsistencies
Business & Political Implications
Observations & Proposal

3. Summary of key facts

4. The Main Issue Countervailing duties Subsidies
Definition of “public body” vs State-owned enterprise (SOE)
Definition of benchmark of benefit
Subsidies
Benchmark of benefit, investigative process, CVD’s
The dispute in this case concerned how an investigating state can determine what the “market benchmark” is for calculating the firm’s benefit from the subsidy
Specifically, this dispute between the US and China concerns how the US (the investigative authority) calculates the level of benefit from a firm’s receipt of below-market–price inputs from the Chinese government (the subsidizing government).
Definition of a “public body” vs a SOE

5. Definitions
CVD (Countervailing Duties): Tariffs levied on imported goods to offset subsidies made to producers of these goods in the exporting country
Subsidy: A benefit given by the government to help businesses remain competitive
Public Body: Organizations controlled by the government that provide a public function
State owned enterprise: An organization that can be government-controlled (majority government ownership) and yet not be a public body because it does not perform any government functions
Benchmark of benefit: The importing country can impose a duty only up to the point that the foreign government subsidy provided the exporting firm with a benefit (SCM Article 14 d)
Specifically, this dispute between the US and China concerns how the US (the investigative authority) calculates the level of benefit from a firm’s receipt of below-market–price inputs from the Chinese government (the subsidizing government).

6. Context General Outline:
The USDOC placed CVD’s on 17 goods imported from China
China then challenged the CVD’s based on the USDOC calculation of the benchmark of benefit
Goods in question:
Thermal Paper, Pressure Pipe, Line Pipe, Citric Acid, Lawn Groomers, Kitchen Shelving, Oil country tubular goods (OCTGs), Wire Strand, Magnesia Bricks, Seamless Pipe, Print Graphics, Drill Pipe, Aluminum Extrusions, Steel Cylinders, Solar Panels, Wind Towers, Steel Sinks
The US placed CVD’s on these 17 goods that the US was importing from China. China then challenged these CVD’s based on the US DOC calculation of the benchmark of benefit.
The international community is facing a climate crisis, and the widespread adoption of cleaner energy sources is generally regarded as a primary and essential element of addressing this crisis. Government subsidies for environmental goods, at first blush, would seem to be a welcome policy choice. They address the issue that the social costs of high carbon energy sources are higher than the private costs.
The US was importing Chinese goods which had been subsidized at ___% by the Chinese government. In response the US imposed counterveiling duties at __%. China brought a case against the US to say that the US CVD’s were higher than the Chinese subsidies. (state owned enterprises were helping to manufacture the exported goods)
The US Commerce Dept said that the benchmark benefit that the goods were receiving was higher than China was claiming it to be.
2 most polarizing goods are the solar panels and wind towers. South Korea and US washing machines & solar panels, hot topic issue

7. Political and Business Snapshot
US reliance on Chinese imports

8. History of US/ China Trade

9. Industry Example: Solar Panels
Video link (in slide)
Embed link: <iframe src=" allowscriptaccess="always" frameborder="0"></iframe>

10. Proceedings 25 May 2012: China requests consultations
28 Sept 2012: Dispute Settlement Body Panel established
14 July 2014: Panel report released
22 August 2014: China appeals Panel report rulings
27 August 2014: US files cross-appeal of Panel report rulings
18 December 2014: Appellate Body report released

11. China´s Position

12. Alleged provision of input goods for less than adequate remuneration
Article 1.1 (a)(1) of SCM: Definition of a Subsidy
USDOC findings of financial contribution are inconsistent because the USDOC didn’t have enough basis to prove that SOEs are public bodies
US's rebuttable presumption (any org owned by the government counts as a public org) is inconsistent
Article 11.2 & 11.3 of SCM: Initiation and Subsequent Investigations
USDOC's initiation of CVD investigations in respect of allegations that SOEs confer countervailable subsidies through their sales of inputs to downstream was inconsistent because they did not have sufficient evidence in the petition to support that the SOEs were "public bodies" (as defined in Article 1.1(a), therefore inconsistent with 11.2 & 11.3)
Article 1.1(b) & Article 14(d) of SCM: Calculation of Subsidy in terms of Benefit to Recipient
USDOC's findings of benefit are inconsistent because USDOC improperly found that alleged provision of goods for less than adequate remuneration conferred a benefit upon the recipient & improperly calculated the amount of any benefit allegedly conferred
Erroneously found that prevailing market conditions in China were "distorted" as the basis for rejecting actual transaction prices in China as benchmarks in certain investigations

13. Alleged provision of input goods for less than adequate remuneration: (continued)
Articles 2.1 & 2.4 of the SCM: Specificity
USDOCs findings are inconsistent because they failed to make a proper determination on the basis of positive evidence that the alleged provision of inputs for less than adequate remuneration as specific to an enterprise or industry or group of enterprises or industries in certain investigations
Articles 11.2, 11.3, 2 of the SCM: Initiation and Subsequent Investigation
USDOCs initiation of CVD investigations in respect of the alleged provision of inputs for less than adequate remuneration, in the absence of sufficient evidence in the petition to support an allegation that any such subsidy would be specific under Art. 2 of SCM agreement and absence of a sufficient review of the petition by the USDOC in respect of this allegation is inconsistent

14. Connection with all the CVD investigations in which USDOC has issued a preliminary or final CVD determination:
Article 12.7 of the SCM: Evidence
USDOC’s use of "adverse facts available" to support its findings of financial contribution specificity and benefit is inconsistent because the USDOC did not rely on facts available for the record
Connection with alleged provision of land and land-use rights for less than adequate remuneration:
Articles 2.2 & 2.4 of SCM: Specificity
USDOCs findings of specificity are inconsistent because they failed to make a proper determination on the basis of positive evidence that the alleged subsidy was specific to an enterprise or industry or group of enterprises of industries in certain land specificity investigations

15. Connection with export restraints allegedly maintained by China:
Articles 11.1, 11.2 and 11.3 of SCM: Initiation and Subsequent Investigation
USDOCs initiation of CVD investigations in respect of these allegations is inconsistent with certain investigations
USDOCs determination that export restraints provided a "financial contribution" is inconsistent with certain investigations

16. United States’ Position

17. The United States requested that the Panel reject all of China's claims in this dispute
USDOC placed CVDs on these 17 Chinese products because they believed that the firms were receiving benefit through subsidies from the government and SOEs

18. Final Findings Definition of “Public Body”: USDOC acted inconsistently
Incorrectly determined that certain Chinese SOE’s were “public bodies” solely because the Chinese government was a majority owner
Articles: SCM Articles 1.1 and 1.1(a) (Definition of a Subsidy)
Definition of “Benchmark of Benefit”: USDOC acted inconsistently
USDOC rejected in-country private prices in China because the market was distorted
Benefit determination cannot automatically exclude in-country prices
Articles: SCM Articles 14(d), 1.1(b), GATT VI, XXIII (Calculation of Subsidy, Definition of Subsidy, Anti-Dumping & CVDs)

19. Final Findings Specificity: USDOC acted inconsistently & consistently
Consistent: USDOC analyzed specificity exclusively under SCM 2.1(c) (Specificity)
Inconsistent:
USDOC did not provide case-specific discussion/ references to certain Chines challenges of specificity
USDOC did not identify a “granting authority” and therefore the relevant jurisdiction
Articles: SCM 2.1(a,b,c)

20. Final Findings Use of “Facts Available”: USDOC acted inconsistently
USDOC made preliminary and final CVD determinations by only relying on “facts available” and “adverse facts”
Articles: SCM Article 12.7 (Evidence)
Initiating Investigations: USDOC acted inconsistently
USDOC started two investigations based solely on existence of export restraints and price suppression effects
Articles: SCM Article 11.3 (Initiation and Subsequent Investigations)

21. Compliance & Implementation
13 February 2015: US reported that it would need a reasonable amount of time to implement rulings and recommendations
9 October 2015: Reasonable period of time is determined to be 14 months and 16 days
13 May 2016: China requests consultations regarding US failure to implement DSB’s rulings and recommendations
8 July 2016: China requested formation of a compliance panel
15 November 2016: Compliance panel reports that it expect to issue its final report in 2017

22. Observations/ Proposal
Compliance proceedings have been ongoing since 21 July 2016
Increased burden of proof for subsidies/ subsidy program
No automatic exclusion of SOE’s in determination of benchmark of benefit
Proposal:
Once compliance proceedings have ended, if USDOC is non-compliant the WTO should allow China to impose equal tariffs
Proposal: once compliance proceedings have ended, if US is non compliant the WTO should allow China to impose equal tariffs. If US is compliant then they would

23. Sources
Main WTO case webpage:
One page summary:
SCM agreement:
GATT agreement:
Panel Report: (link to download)
Appellate Body Report (link to download):
Case Study Summary: EUI:
Video: